Successful gilt auction alleviates fears over Bank’s strategy change

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BRITAIN easily placed a £2bn sale of 25-year gilts yesterday, although prices were forced lower ahead of the auction as investors demanded a premium after the central bank halted its bond-buying programme.

The auction of September 2034 was seen as a litmus test for the market after the Bank of England’s decision to halt its quantitative easing programme last week.

In the event, the issue had cheapened enough to attract bids worth more than twice the amount on offer. The yield and price tails were also reassuringly tight, at 0.3 basis points and 5 ticks respectively, less than half their level in November.

The gilt sold at a price equivalent to an average yield of 4.498 per cent, compared to 4.304 per cent on 4 November.